By Tiernan Ray

As I mentioned earlier, Pac Crest‘s Michael McConnell raised his rating on Intel (INTC) shares today to Outperform, based on several factors. McConnell penned a second item, with his colleague Jesse Hulsing, who follows enterprise technology names, reflecting on the chip maker’s announcement last week it would partner with Cloudera, a startup that is commercializing the open-source “Hadoop” software technology.

Hulsing sees Intel’s deal with Cloudera prompting a “land grab” in Big Data M&A, which could names such as Splunk (SPLK) and Informatica (INFA).

Intel is obviously trying to defend its server microprocessor turf from incursions by ARM Holdings (ARMH), the two authors write. ARM is providing server chip technology to a number of Intel’s chip competitors, including Applied Micro Circuits (AMCC), Advanced Micro Devices (AMD), and others.

But for the enterprise tech area, the efforts of Intel and Cloudera, and others such as privately held Hortonworks, are in part going after the turf of Teradata (TDC), whose shares Hulsing rates Outperform, the authors write:

We expect a significant percentage of Cloudera’s war chest (likely $500 million or more after a portion of Intel’s investment went to shareholders) to be funneled into go-to-market efforts. Hortonworks and others in the market such as MapR, Pivotal and IBM BigInsights are also well funded. We expect Hadoop pilots to accelerate, per node pricing to be under some pressure (made up for by bundling in new features), and the market to remain in the evaluation stage as enterprises map out their platforms for the future. We view this as a slight incremental negative for Teradata, as competition for big data wallet share will remain high. However, there will be growth in this market and we think it could take multiple years for Hadoop distributors to develop database technology which broadly competes for core Teradata workloads.

The result of selling a commodity is that Cloudera and others will try to quickly add features to distinguish themselves, the authors write:

While we think there is significant opportunity in selling support and services related to core Hadoop (MapReduce and HDFS), the opportunity for differentiation could be limited in the long run. Because of this, we think the Hadoop distributors will push to move up market, selling database, streaming, and transformational platforms that sit on HDFS. YARN and Hadoop 2 are a key enablers of such a move, as they allow multiple workload types to be run on the same cluster. Cloudera’s Enterprise Data Hub offering solidifies its attempt to move upmarket. The EDH carries a higher average selling price (ASP) due to additional bundled technology (Impala, for example) [...] This is obviously a potential threat for other players in the analytic platform market. However, database technology in particular is very challenging to develop, and we think it will take some time for Cloudera to develop its solutions. Cloudera could also use M&A to fuel its differentiation efforts. Spark, essentially an in-memory version of Hadoop, presents an opportunity for such differentiation.

As a result of Cloudera and others going up-market, the authors believe names such as Splunk and Informatica, rated Outperform and Market Perform, could see their valuations rise as acquisition targets:

Adoption in the Hadoop market is still very early. We estimate there are 500 to 700 total paying customers worldwide. Use cases beyond storage, live archiving and ETL are just starting to emerge and be evangelized [...] We think Cloudera’s revenue was between $50 million to $100 million in 2013, meaning the company’s valuation is north of 40x EV/TTM sales. This could buoy valuations across the sector. Even so, given the race for mindshare and technology leadership that is under way, we think M&A could start to intensify after a relatively quiet couple of years in the big data sector. Spaces to watch: SQL or BI on Hadoop (Platfora, ClearStory Data, Splunk, search (Splunk, Elasticsearch, LucidWorks), in-memory processing (Spark), integration (Pentaho, Talend, Informatica), services (Mu Sigma, Opera Solutions, Think Big Analytics) and data preparation (Paxata).

Hulsing and McConnell are much less concerned about the Hadoop threat to Teradata than others. such as Cowen & Co.’s Peter Goldmacher, wholast week warned about the matter.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.